A collective bargaining agreementprovided that certain retirees, along with their surviving spouses and dependents, would “receive a full Company contribution towards the cost of [health care] benefits”; that such benefits would be provided “for the duration of [the] Agreement”; and that the agreement would be subject to renegotiation in three years. The 6th Circuit had held that thiscreated a vested right to lifetime contribution-free health care benefits.

The Supreme Court said that the 6th Circuit reached its conclusion by usingprinciples that are incompatible with ordinary principles of contract law. In particular, the 6th Circuit followed the reasoning in its famous International Union, United Auto, Aerospace, & Agricultural Implement Workers of Am. v. Yard-Man, Inc., 716 F.2d 1476 case.

The Court had this to say about Yard-Man:

Yard-Man violates ordinary contract principles by placing a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements. That rule has no basis in ordinary principles of contract law. And it distorts the attempt “to ascertain the intention of the parties.”